OpenSea Pushes Back Against SEC’s Proposal To Treat NFT Platforms As Securities Exchanges
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The US Securities and Exchange Commission (SEC) recently introduced a new proposal that would see NFT platforms treated in the same manner as their analog securities-exchange and brokerage firm counterparts. However, OpenSea, the largest NFT platform in the industry, decided to push back against this proposal.
Under the SEC’s new proposal, NFT platforms would have to abide by the same rules and regulations as securities platforms, while OpenSea argued NFTs are fundamentally different from traditional securities. As such, according to the platform, they cannot be bound by the same rulebook.
The regulator’s rule change would also expand the definition of “exchange,” to include platforms that bring together the exchange of crypto assets, NFTs included. If this happens, NFT platforms like OpenSea would likely be obligated to register as securities brokers or exchanges, which could introduce additional burdens in the form of exorbitant compliance costs. As a result, the NFT industry could end up seeing a major change.
OpenSea Listed Multiple Reasons Why This Is A Bad Idea
As mentioned, OpenSea argued against this, emphasizing the custom-made character of non-fungible tokens. It said that they are typically used to depict collectibles, music, digital art, and similar creative works. As such, they cannot be exchanged for each other like stocks or currencies, nor do they embody ownership of firms or an interest in profit.
Given that, OpenSea insists that it would be improper for NFT platforms to have the same regulatory requirements. Its letter also resonates more broadly with digital art and Web3 communities’ existing fears that excessive regulation would hinder innovation and growth of new ventures.
The company said that requiring NFT marketplaces to register as regular exchanges or brokers is likely to discourage startups from joining the marketplace, as operational and legal costs would be too high. Furthermore, the marketplace urged the SEC to weigh against the possibility of unintended effects, such as forcing NFT platforms to limit access to US users.
Another potential consequence would be the reduced level of artists and developers they support. In light of that, it urged the SEC to take a more thoughtful and cooperative approach in order to protect consumers and allow the NFT ecosystem to continue to expand.
